The second step involves gathering all your credit card statements, bank statements, and check books for the last three months.  The goal is to find out from the last three months what all your revenue and expenses were. The next step is to record all the expenses and revenues into similar categories.  After you have organized your expenses into these categories you will need to figure out the monthly average.  I would recommend using Microsoft Excel or you may want to purchase personal finance software like Quicken.

“You can’t control what you can’t measure”

~Tom DeMarco

Example

We will help you through the process of learning the Debt Management Plan by giving you an example.  Mr. Smith is married with two kids.  He makes $45,000 a year and his wife does not work.  Over the past seven years of marriage the Smith family has accumulated approximately $25,000 in credit card debt in addition to his car loan and the mortgage on his house.  Mr. Smith organized his expenses and revenues into three categories and divided those three months of expenses by 3 to get a monthly average.  See his spreadsheet here.

One item to note from this spreadsheet is on average Mr. Smith is spending $312 more a month than he is earning.  Over the course of a year you would anticipate his debt to increase approximately $3,800 a year.  It is no wonder over the years he has accumulated $25,000 in credit card debit.